American Airlines and US Airways today agreed an $11 billion (£7.1 billion) merger that will create the biggest airline in the world with about 1500 planes, more than 3000 flights every day and 100,000 staff.

The combined business will fly under the AA brand but is expected to be run by US Airways’ chief executive Doug Parker. AA’s boss, Tom Horton, will serve as a temporary chairman until the middle of next year, according to insiders.

Fears were raised that prices would rise as a result: after the deal, a combined AA/US Airways airline plus Delta and Southwest will together control three-quarters of America’s flight traffic. “A US Airways/AA combination poses potential concerns for competition and consumers,” said Diana Moss, vice-president of the non-profit group the American Antitrust Institute. Its study found ticket prices rose 30% on some United-Continental routes and 20% on some Delta routes after their mergers.

British fliers are likely to be hit as International Airlines Group, the owner of British Airways and Iberia, has a joint venture with AA which sees the airlines share transatlantic routes, schedules and fares. “From IAG’s point of view, we think this deal is good news as it creates a much stronger US partner and boosts the scope of the transatlantic joint venture,” said aviation analyst Edward Stanford at Oriel Securities.

Although today’s deal still has to be approved by competition regulators and a US bankruptcy court, the US justice department has not challenged an airline merger since 2000’s proposed United Airlines/US Airways tie-up.

The merger is the third major US airline deal since 2008, with United combining with Continental, and Delta buying Northwest. US airlines have faced major turbulence over the past decade, with Delta, Northwest, United, American and US Airways all filing for bankruptcy protection to keep their assets safe from creditors while they restructure.

Airlines in the US suffered a plunge in demand after the September 11 terrorist attacks, and used bankruptcy protection to counter the effects of high wages and rocketing fuel bills.

AMR, the owner of American Airlines, lost more than $12 billion between 2001 and 2010 and lost another $2.8 billion since it filed for bankruptcy protection in November 2011. By contrast, US Airways last month posted a seventh consecutive quarterly net profit, and earned a record profit of $637 million last year.